Measuring economic insecurity: a simulation approach

Publication type

CeMPA Working Paper Series

Series Number

CEMPA2/20

Series

CeMPA Working Paper Series

Authors

Publication date

June 26, 2020

Abstract:

We suggest a new individual-based measure of economic insecurity where expectations about the future evolution of individual life courses are derived from a dynamic simulation model. This allows to take into account risks over many dimensions including work, family and health. On the earning side, we summarise the uncertainty over future income trajectories with a monotonically increasing concave function of income, which penalises income volatility over time and over possible individual trajectories while assigning higher value to higher levels of economic resources available. On the expenditure side, we take into account different household characteristics by means of appropriate equivalence scales.

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